OG&E 2013 Annual Report Download - page 64

(Year ended December 31) 2013 2012 2011
Statutory Federal tax rate 35.0% 35.0% 35.0%
Amortization of net unfunded
deferred taxes 0.6 0.8 0.7
State income taxes, net of Federal
income tax benefit 0.4 (0.1) 0.6
Federal investment tax credits, net (0.4) (0.4) (0.7)
401(k) dividends (0.5) (0.5) (0.5)
Income attributable to
noncontrolling interest (0.3) (1.6) (1.3)
Federal renewable energy credit(A) (7.2) (7.2) (3.4)
Uncertain tax positions 1.5 ––
Remeasurement of state deferred
tax liabilities (4.1) ––
Other (0.1) –0.3
Effective income tax rate 24.9% 26.0% 30.7%
(A) Represents credits associated with the production from OG&E’s wind farms.
The deferred tax provisions are recognized as costs in the ratemaking
process by the commissions having jurisdiction over the rates charged
by OG&E. The components of Deferred Income Taxes at December 31,
2013 and 2012, respectively, were as follows:
(In millions, December 31) 2013 2012
Current deferred income tax assets
Net operating losses $÷«180.1 $÷«152.4
Accrued liabilities 22.3 27.1
Federal tax credits 8.0 6.0
Accrued vacation 4.7 3.8
Uncollectible accounts 0.7 1.0
Total current deferred income tax assets 215.8 190.3
Current accrued income tax liabilities
Derivative instruments –(2.6)
Total current accrued income tax liabilities –(2.6)
Current deferred income tax assets, net $÷«215.8 $÷«187.7
Non-current deferred income tax liabilities
Accelerated depreciation and other property
related differences $1,753.3 $1,660.3
Investment in Enogex Holdings –638.0
Investment in Enable Midstream Partners 630.5 –
Company pension plan 55.1 52.4
Income taxes refundable to customers, net 21.9 21.2
Regulatory asset 26.1 18.8
Bond redemption-unamortized costs 3.6 4.0
Derivative instruments 1.6 1.5
Total non-current deferred income tax liabilities 2,492.1 2,396.2
Non-current deferred income tax assets
Federal tax credits (105.2) (69.6)
State tax credits (92.6) (83.7)
Postretirement medical and life insurance benefits (62.8) (57.6)
Regulatory liabilities (61.3) (71.4)
Asset retirement obligations (20.8) –
Net operating losses (18.8) (159.1)
Other (4.6) (4.5)
Deferred Federal investment tax credits (0.7) (1.5)
Total non-current deferred income tax assets (366.8) (447.4)
Non-current deferred income tax liabilities, net $2,125.3 $1,948.8
As of December 31, 2013, the Company has classified $7.8 million
of unrecognized tax benefits as a reduction of deferred tax assets
recorded. Management is currently unaware of any issues under review
that could result in significant additional payments, accruals, or other
material deviation from this amount.
Following is a reconciliation of the Company’s total gross
unrecognized tax benefits as of the years ended December 31,
2013, 2012, and 2011.
(In millions) 2013 2012 2011
Balance at January 1 $÷«– $– $–
Tax positions related to current year:
Additions 2.7 ––
Tax positions related to prior years:
Additions 5.1 ––
Balance at December 31 $7.8 $– $–
Where applicable, the Company classifies income tax-related
interest and penalties as interest expense and other operation and
maintenance expense, respectively. During the year ended December 31,
2013, there were no income tax-related interest or penalties recorded
with regard to uncertain tax positions. The total amount of unrecognized
tax benefits that would impact the effective tax rate, if recognized, was
$7.8 million as of December 31, 2013.
As previously reported, in January 2013, OG&E determined that a
portion of certain Oklahoma investment tax credits previously recognized
but not yet utilized may not be available for utilization in future years.
During the first quarter of 2013, OG&E recorded a reserve of $7.8 million
($5.1 million after tax) related to a portion of the Oklahoma investment
tax credits generated in years prior to 2013 but not yet utilized due to
management’s determination that it is more likely than not that it will
be unable to utilize these credits. An additional reserve of $4.1 million
($2.7 million after tax) was established with regard to these credits
generated in the current year.
Prior to 2013, the Company had a Federal tax operating loss
primarily caused by the accelerated tax “bonus” depreciation provision
contained within the Tax Relief, Unemployment Insurance Reauthorization
and Job Creation Act of 2010 which allowed the Company to record
a current income tax deduction for 100 percent of the cost of certain
property placed into service in 2011 and 50 percent for certain property
placed into service in 2012. During 2013, the Company began to utilize
these net operating losses.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was
signed into law. Among other things, the law included an extension of
bonus depreciation for one year for property generally placed in service
before January 1, 2014. The impact of the new law was reflected in the
Company’s 2013 Consolidated Financial Statements as an increase in
Deferred Tax Liabilities with a corresponding increase in Deferred Tax
Assets related to the net operating loss.
58 OGE Energy Corp.